Is It Too Late for Amazon to Kill Apple?

It's starting to look like the aspirin aisle at a dollar store. Whoa! Check out all of these cheap tablets!

We already know that Google's (Nasdaq: GOOG) Nexus 7 will hit the market in a few days. Rumors that Apple (Nasdaq: AAPL) will roll out an iPad Mini continue to swell.

Next week's arrival of Google's $199 tablet and the potential for a slightly larger Apple device in the $300 range seem to leave Amazon.com's (Nasdaq: AMZN) Kindle Fire out in the cold, but we all know that CEO Jeff Bezos hasn't sacrificed near-term margins and lucrative home-page promotional space simply to throw in the towel when it comes to its entry-level tablet.

A new Kindle Fire is inevitable, and it could be here sooner than you might think.

Fire awayAllThingsDis hearing that Amazon is getting ready to refresh its Kindle Fire line as early as this quarter. After introducing its original $199 tablet in November, the updated version may be shipping as early as September. If so, this wouldn't be the first time we've seen this happen. There was just a 10-month gap between Apple's iPad and the iPad 2.

However, there wasn't a sense of desperation when Apple pushed its sophomore gadget so soon. For Amazon, sprucing up its Kindle Fire -- and doing so quickly -- is a matter of survival. The Nexus 7 will make similarly priced Amazon and Barnes & Noble (NYSE: BKS) tablets seem like yesteryear's toys this month.

Google's tablet will have double the RAM, a stronger processor, and better resolution than the Kindle Fire and Nook Tablet. It also features GPS, Bluetooth, and a microphone. It may not seem fair to compare the Nexus 7 with the larger and far more expensive iPad, but it does offer a seemingly better front-facing camera and comes with an NFC chip.

Apple's new iPad should fare just fine, but Kindle Fire sales may very well come to a grinding halt next week.

Last year's hot plaything seems datedThe Kindle Fire was a holiday darling last year. Amazon doesn't reveal actual unit metrics on any of its Kindle products, but analysts and research firms believe that the leading online retailer managed to sell nearly 5 million tablets during last year's fourth quarter. It was an encouraging number for a product that didn't ship until halfway through the period.

Amazon's head-turning tablet was no match for the iPad 2, but it was the undisputed silver medalist in this space. However, things slowed down in a hurry after Santa and the early adopters went away. Hardware-sales tracker IDC reported that Kindle Fire shipments slipped from 4.8 million during the fourth quarter to a mere 750,000 during the first three months of this year.

There's little reason to believe that the trend is going to get any better, as Apple knocked $100 off the price of its iPad 2 a few months ago and the arrival of the Nexus 7 is imminent.

Go ahead and shout Fire in a crowded theaterCompanies usually like to keep their updates quiet for as long as possible. It's just bad business to brag about upcoming products too soon, stalling sales of the current models that are still being sold. However, if Kindle Fire sales are already running sluggish -- and Nexus 7 is about to raise expectations of what tablet shoppers should get for $199 -- Amazon can't afford to wait or be silent.

There are certainly advantages to the original Kindle Fire, largely centered on the Amazon Prime membership program that gives folks paying $79 a year access to thousands of videos and monthly e-book rentals at no additional cost. However, that was the selling point for the first 5 million buyers. The next 5 million will need incentives that aren't necessarily tied to an annual subscription plan. Whether Amazon's vetted Android app store is a benefit or a disadvantage is debatable.

If Amazon doesn't speak up now, it won't be long before it simply retreats to its cheaper Kindle e-readers that have proved to be successful category leaders.

Instead of merely trying to fight Apple on price, Amazon now needs to fight Google on specs. Amazon needs to get better -- and louder -- soon.

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The Motley Fool owns shares of Amazon.com, Apple, and Google.Motley Fool newsletter serviceshave recommended buying shares of Apple, Amazon.com, and Google, creating a bull call spread position in Apple, and writing puts on Barnes & Noble. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.

Longtime Fool contributorRick Munarrizcalls them as he sees them. He owns no shares in any of the stocks in this story and also part of theRule Breakersnewsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Motley Fool has adisclosure policy.

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Let's see. The only purpose I can see for the Fire is to sell Amazon services; without accomplishing this, it not only adds nothing to the bottom line at Amazon, but pulls it inexorably downward. So they are not simply interested in gaining market share in the cheap tablet arena. Any enhancements they make would be aimed at remaining attractive enough to tablet users so that they can push those services. This is not a recipe for creating a world-beating product. Another thing: Amazon is very cagey about not really showing you all the content that is available for 'free' with a Prime membership. In fact, most of the stuff is old, second-rate movies and old, second-rate books. No way they are giving you the good stuff. If you try and get an overview of what is and is not included, you have to scroll through page after page. I think this is deliberate and obscures the fact that the content is pretty weak. What do you want for free? It is mostly there to support the claim of "thousands of free videos."

I think this is a far cry from Apple bringing out a competitive tablet or Pad. With their expertise in hardware design and software creation, the machine will make money from day one. It will drive more users into the Apple ecosystem. If on top of that, Apple happens to increase movie and book sales (as well as App sales,) that's just gravy on top of gravy. I don't see Amazon catching up to Apple any time soon, and they certainly won't do it in profitability, no matter how much they drive their volume by pricing things at either under market or at market values. Sure, they may drive brick/mortar bookstores out of business, but that's not the real obstacle to their growth. Apple and Google are, and both of them make a whole lot more money than Amazon. Sounds like a losing battle to me, byt maybe Jeff Bezos has the master master plan behind the curtain. Good luck!